How I Trade

Update: May 2012
For stocks that have dropped a lot in price, I will still aim for no-speculation Covered Calls. I can look at options that expire a few months ahead instead of in the following week or month. The aim here is to still have no speculation and to not spend too much time watching the market.


Update: February 2012
Target ROI is reset to a more modest 2% a month, which is still better than 1% per month, which is typically the upper ceiling of what options can do, according to most financial-industry-savvy types I've spoken with.
I am comparing the return to a reliable 8% REIT, which can easily be gotten through League.ca.

Update: December 2011
Since Cash-Covered Puts cannot be done with QuesTrade at this time (I need $25000 in the account, and I am starting with just $5000), I will buy somewhat volatile stocks and write Covered Calls, aiming for 3%+ whether I am assigned or not.
I will aim to write In-the-Money Covered Calls to get rid of stock so that I am not holding on to any stock for too long.
If the stock price drops significantly, I will write Out-of-the-Money Covered Calls until either the stock price goes back up and I am assigned, or I have made enough money from the stock from previously collected premiums that I can write a Deep-in-the-Money Covered Call to get assigned and get rid of the stock.

Update: November 2011
The aims are to reduce or eliminate speculation, to try to return to cash as frequently as possible, and to limit time spent watching the market and setting up trades.
My trading plan is to write Cash-Covered Puts and collect premiums. If actually assigned, I would switch to writing In-the-Money Covered Calls to get rid of the stock.
The target ROI on the capital committed is 3% a month. I will precalculate assigned/not-assigned positions to make sure that I do not have a losing position either way.
By capital committed, I mean the money in the trading account. Idle money therefore reduces the ROI.
I also do not count unrealized stock value gains or losses. That is, the stock price is fixed at whatever I bought it for when I calculate my ROI.